The Perks of Investing In Fixed Deposits

Fixed Deposits

Fixed deposit is a financial instrument that banks and NBFCs (Non-Banking Financial Companies) offer to grow investments of the investors. Fixed deposits are a great avenue that ensures guaranteed returns. In this investment plan, the investors are eligible to deposit a lump sum amount for a particular tenure as per their convenience. 

Once the deposited amount is locked, it grows significantly at provided interest rates. It remains unaffected by any other changes in interest rates or market fluctuations. Thus, the investors get returns as per pre-decided interest rates. The investors have the liability to choose the investment tenure for the funds’ maturity. If it is withdrawn before maturity, the investor shall be liable to be penalized. 

Taxability On Fixed Deposits

Fixed deposits are interested in different rates of interest offered by different banks. Usually, senior citizens get higher return rates than younger investors. Corporates offer interest rates on fixed deposits based on cumulative and non-cumulative bases depending on the choice of the applicants. 

Advantages of Investing in Fixed Deposits 

Assured Returns

Once you invest in fixed deposits in any bank, the rate of interest is affixed and applicable for the term you invest in. Irrespective of the market fluctuations, the funds are safe and secured. Your principal amount will continue to grow at the same interest rate you invest in the principal amount.  

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Without affecting your pockets, you can start investing with as low as Rs. 5000 with no fixed upper limit. This is what makes it available for everyone. Any figure is admissible to invest in fixed deposits. Depending on the tenure (short-term, mid-term, or long-term), you get returns. To know the ‘to be matured’ amount with a fixed deposit interest calculator that helps you in the accurate computation of your investment. 

Liquidity of funds

There comes a time of cash crunch then fixed deposits help you out. On applying for withdrawal requests, the investors are eligible to withdraw the principal amount along with the fixed interest accrued for that duration. The FD withdrawal process is quick making it easy to access your funds. 

FD as Collateral 

If you are looking for a loan and have nothing to offer, fixed deposits can be pledged to seek 95% of the loan amount. Depending on the FD amount and terms & conditions of the banks, you can avail of the loan facility.

Saving on taxes

As per the Income Tax Act, 1961, individuals are allowed to claim for deductions up to Rs. 1,50,000. Under section 80 C, your investments qualify as tax-deductible thereby reducing your tax liability. 

Assured savings

Deposit Insurance and Credit Guarantee Corporation being a subsidiary of RBI (Reserve Bank of India) insures your investment upto Rs. 5,00,000. In case of a financial crisis in banks, the fixed deposits are still safe. 

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Less efforts 

Investors are free from monitoring and understanding the market to keep a check on the fixed deposits. With one-time efforts, anyone can open an account to start investing. 

Corporate FDs over bank FDs

Guaranteed returns 

Corporate fixed deposits offer guaranteed returns on the investments like the fixed deposits in banks. If you invest Rs. 50,000 or Rs. 1 lakh at a fixed interest rate, then the investors have their funds secured for the dedicated tenure regardless of the financial crisis or market conditions. 

Additionally, you know the maturity amount at the early stages of the investments. It fills you with higher confidence to invest safely. 

An advantage for senior citizens

Like other bank deposits, corporate fixed deposits offer a higher rate of return to senior citizens. If citizens under the age of 60 are gaining profits at 6% then senior investors would get benefits at more than 6% on the same investment. For retired senior citizens, it generates a consistent income.

Computation of Gross Profits 

Here is how you can calculate the maturity amount of your investment:

The deposited funds are matured in two ways: simple and compound interest.

For simple interest, 

M = P+ (P x r x t/100). Here,

M = Matured amount

P = Principal amount that you deposit

R = Rate of interest per annum

T = Time period for investment 

Simply put, if you invest a principal amount of Rs. 3000 every month at the rate of 10% interest for 5 years. Your investments mature at Rs. 2,94,951. 

To evaluate compound interest, 

M= P + P {(1 + i/100) t – 1} 

Here, all the variables are represented as above. 

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Associated Risks in Fixed Deposits

Though fixed deposits are considered safe and secured for investors, there are significant underlying risks. 

Liquidity risk

The deposited amount is fixed for a specific tenure. Investments are matured within months and can extend up to 7-10 years as well depending on the term plan. Contrarily, the corporate FDs have a stretched investment tenure from 1 to 5 years. Moreover, these aren’t traded in the secondary market which is a big challenge.

Investors can easily pledge FDs against bank loans that don’t exist in corporate FDs. Corporate FDs have no exit route from the investments before maturity. 

Issuers default risk

The authorized and commercial banks have lower default risks on FDs but the small cooperative banks are likely to be defaulters. It leads to vulnerability for the investors. Under the new rules of the Income Tax Act, the claimed amount by the investors is spread to multiple banks for fully assured returns. 

Inflation risk

Inflation affects almost all investments. If in the initial stages of investment, the inflation rate is high, the investors might get fixed deposits at relatively low rates of interest. Although returns are the same, the real returns rates are impacted. 


Future security is the most crucial asset for citizens with fixed income and fixed deposits bring assured returns at the age of senility. Most of the investments come along with associated risks while we help you to invest at a significant interest rate. Investing for the long-term is a wise strategy to grow funds and that can be evaluated using online calculators easily.  

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